Retail runs on numbers. And retailers measure everything. How fast is my inventory turning? How many days of supply are in my warehouses? When do my best customers shop? You name it. But when retailers talk about space productivity (the sales per sq ft or GMROS for brick and mortar stores) suddenly metrics dry up.
CPG’s and manufacturers measure space simplistically. They compare a brand’s market share to their share of space on a planogram. Often referred to as “fair share” analysis. It can be as simple as saying “if my brand has 20% market share, I should get 20% of the space.” So advanced space scorecards are more uniquely a retailer issue rather than a supplier issue. Which means that it is an underfunded and undervalued area for space solution providers.
Why are Space Measurements so rare?
First, space scorecards could have many different things to measure:
- The productivity of departments or categories in all stores compared to one another
- Space productivity changes before and after a remodel, planogram change or adjacency change.
- A comparison of one store or a set of stores against all others in total space productivity
Which means, retailers must understand what they are trying to measure. Then they must understand how to make an accurate baseline of what they measure. Because while the base data is the same, the scorecard components may be different.
Second, space scorecards require a high degree of confidence in store execution. Let’s say a retailer does not have a planogram for apparel. Knowing that children’s apparel takes up 1800SF of store space while women’s apparel uses 2900SF will suffice for certain scorecards. On the other hand, if bottled water uses 40′ of planogrammed space plus 7 additional bulk stack locations in the store which are unaccounted for in the space scorecard, the measurements are untrustowrthy. Lack of in store conditions will skew measurements. In this example, the bottled water area will look more productive than it actually is. Therefore, to build trust, account for promotional space and secondary display space in scorecards.
Third, retailers have not aligned on common measurements and metrics. So solution providers have not been directed by retailers to solve this reporting problem. With more focus and alignment on what a good space scorecard looks like, spcae metrics could be more standardized and common.
Finally, Space metrics can overlap with other more common metrics – such as Days of supply or ROII for inventory. Most retailers know how to use sales, profit and inventory metrics. But they do not get an education on how to improve space metrics. Or even how to understand when a change in space or inventory will cause a corresponding change in another metric. So even if space scorecards exist, there is a gap in business understanding about how to make better merchandising decisions based on space measurements.
Do we need Space Scorecards?
A recent gathering of retailer space planning leaders said that Creating Space Scorecards was the #1 gap that retailers should focus on. Why? Because in an Omnichannel world, understanding where to merchandise products is key. BOPIS or Click and COllect order staging takes up space. That space has to come from somewhere. We see two concerns if retailers are not measuring space productivity. First – at a macro level – they don’t know where to reduce space in store for BOPIS operations without harming revenues. Second – at a micro level – they don’t know whether assortment selections should be just in store, online and in store or Just online. You know what would help? Space Scorecards.